New Rules on Disclosure of Donors to NYS Lobbying Campaigns – Lobbying in Plain View of Consumers and Shareholders

Posted by Kelly Williams

Today the Joint Commission on Public Ethics adopted draft regulations implementing a portion of the 2011 ethics bill that requires that lobbying entities spending in excess of $50,000 per year on lobbying expenditures disclose the identity of their sources who give in excess of $5,000 in a 12-month period.  The regulations will implement a new disclosure regime that will enable the public, the media and lawmakers to understand who stands behind the large lobbying campaigns in the state.   Long-standing and well-accepted laws at the national and local level have long required lobbying entities to disclose their own identities and their expenditures.   But every once in awhile, a large campaign would be organized by wealthy corporate interests just for the purpose of passing or defeating a specific piece of legislation with a moniker that didn’t provide any clue about who was really behind the effort.  The source of the funds for these lobbying organizations and expenditures wasn’t part of the system of lobbyist registration and disclosure.   We believe the new regulations put in place today constitute the first disclosure system for donors and sources to lobbying organizations.  The new regulations will go a long way towards increasing transparency and accountability and may ultimately end the practice of this “black box” lobbying in our state.    Going forward large lobbying organizations in New York State will be disclosing their sources and donors much the same way donors to political campaigns and independent expenditure advertising are disclosed.   Large lobbying campaigns will now be conducted in plain view.  The combination of the new lobbying source disclosures and existing political disclosures may also provide useful information in the years to come. 

The new regulations allow for lobbying organizations to apply for an exemption to the general rule requiring disclosure for instances where the lobbying organization shows “by clear and convincing evidence that disclosure of the …[source of funds] will cause harm, threats, harassment or reprisals to the [source] or individuals or property affiliated with the [source]. “    This process was intended for the benefit of donors to controversial campaigns, such as those for civil rights, who in some states have been the subject of intimidation and harassment.  

It remains to be seen how the Commission will grant exemptions going forward.  We would urge the Commission to clarify that disclosure is the rule, exemption the rare exception.   One of the factors enumerated in the regulations is of concern to us: it allows the Commission to take into consideration: “The impact of disclosure on the ability of the Single Source or Client Filer to maintain ordinary business operations and the extent of the resulting economic harm.”  This factor was not part of the bill passed in 2011, it has been added by the drafters of the regulations at the Commission.   We strongly urge that this not be used to allow for-profit businesses to cloak their lobbying expenditures by arguing that they face an economic boycott or shareholder disapproval if their identities are disclosed.    Consumers have a right to know, and shareholders have a right to voice their concerns. 

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

New York Campaign Finance and Ethics News 

1. Even with the legislature out of session, lobbyists and politicians are swinging clubs together at golf fundraisers. The Albany Times-Union reports that the Republican Assembly Campaign Committee recently held its annual fundraiser at the Wiltwyck Golf Club. The Democratic Assembly Campaign Committee and the Senate Republican Campaign Committee each have similar fundraisers planned over the next month. “The golf events aren't about golf. Like any political fundraiser, it's a chance to spend easy time with lawmakers and their closest aides, building relationships that will make more serious talk in the Capitol hallways go easier.” Sean Coffey, writing in The Buffalo News, notes that this shocking degree of camaraderie is due to the lax campaign finance laws in New York state. The simple truth is that in such an environment “voters can’t compete. Less than one-half of 1 percent of voters donate to political campaigns, making New York dead last among the states in citizen participation (and 48^th in voter turnout).” That is why—as the Brennan Center and Sean Coffey have argued–New York State needs a public financing system modeled on New York City’s. This would encourage participation by everyday New Yorkers in the political process and reduce overreliance on donations from a few wealthy individuals and corporations.

2. This summer, politicians in Albany are busy amassing funds for their war chest. In the Senate the GOP campaigns have acquired a total of $ 20. 3 million while the Democrats have pulled together $ 3. 8 million. Many lawmakers have also begun bolstering their campaign accounts through investments. Democratic Assembly Speaker Sheldon Silver has earned $ 41, 571 in dividends and interest by investing a portion of his $ 2. 8 million campaign funds. Republican Senate Majority Leader Dean Skelos has invested $ 717, 319 out of his $ 2.1 million war chest.  An examination of Silver’s campaign finance records displays that his investments include companies with state contracts, lobbying relationships with legislators, and regulatory interests. The list also contains several firms that contributed handsomely to Silver’s campaign such as Verizon, JP Morgan Chase and GE. Skelos’s investments reveal bonds in local government, school district, hospital, library and public works projects. Although the investments are legal–they are operated by separate mutual funds–they nonetheless raise questions about conflicts of interests. Elected officials are required to disclose the purchase of investments, but they do not need to provide details about interest and dividends gains or losses.  

National Campaign Finance and Ethics News

1. If the public is curious about why elected officials rarely address their concerns, part of the answer surely lies with the influence of special interests in D.C. and state capitals alike. Following the tragic Colorado movie theatre shooting, Representative Carolyn McCarthy (D-N.Y.) criticized her colleagues for blindly doing the bidding of the National Rifle Association and failing to take any measures toward greater gun control. This is not surprising given that the NRA has spent nearly $ 25.6 million in campaign contributions and $ 24 million in lobbying expenditures to influence lawmakers according to a Sunlight Foundation Report. Meanwhile two popular weapons manufacturers, Smith & Wesson and Remington Arms, have spent $ 2.2 million and $ 1.4 million respectively in lobbying efforts. 

2. The recent LIBOR scandal has shed light on an egregious form of misconduct. American and British financial institutions were colluding to artificially manipulate the LIBOR rate, a benchmark utilized to determine interest rates on trillions of dollars worth of consumer loans, mortgages, credit cards, and state and municipal bonds. With this latest development, the pressing need for financial regulation is quite evident; however Wall Street is again attempting to gut existing consumer protection provisions in the Dodd-Frank law. The financial industry has been active on Capitol Hill, contributing immense sums to Republicans seeking to water down or repeal financial regulations. From 2011 to the first quarter of 2012 the finance, insurance and real estate sector spent $ 600 million lobbying Congress and federal agencies with a team of 1, 984 lobbyists.  Similarly, the Chamber of Commerce has allocated $ 55 million to lobbying efforts during the first half of 2012. Outside spending by financial interests has increased 20-fold from $ 3.2 million in 2008 to $ 60 million in 2012.

3. Unbridled corporate campaign spending and billionaires with a desire to influence national policy have dominated the narrative this election season. In a satiric piece, The Onion implies that the presidential election may be decided by a few swing corporations. Sadly, with the advent of unlimited campaign contributions to Super PACs and inadequate disclosure, the satire strikes a nerve that is all too real. According to the Washington Post, Conservative Super PACs and 501(c)(4) “social welfare” organizations have spent $ 94 million on TV ads, while their liberal counterparts have spent approximately $ 19 million. In combination with Romney campaign, the aggregate air time purchases by the panoply of Republican outside groups amounts to $ 179 million. For their part, Obama and the aligned union of Super PACs and non-profits have spent $ 128 million on general election ads to date. An interactive map by the Washington Post illustrates the vast sums spent by all the various campaign committees, PACs and non-profits.

4. According to the Center for Public Integrity, over 100 companies have collectively donated more than $ 14. 2 million to Restore Our Future, the pro-Romney Super PAC, accounting for 15 percent of the $ 82 million raised by the group thus far. Nearly two-dozen companies have given $ 9. 4 million to American Crossroads, the GOP Super PAC, constituting 23 percent of its $ 40 million fund. Democratic Super PACs have struggled to keep pace, relying largely on unions and wealthy individuals. Non-profits are on track on outspend Super PACs, an advantage for the donors and strategists since 501(c)’s do not have to disclose the identities of contributors.

5. Despite the overwhelming influence of corporations and large donors in this election, small donors do have some role to play. The Obama campaign has raised 39 percent of its contributions from small donors, those donating less than $ 200 to the campaign in the aggregate. Meanwhile Romany remains dependent on large donors, with small donors only composing 15 percent of his war chest, although the proportion is steadily rising.

6. In a positive development, the House Fair Elections Now Act (H.R. 1404) has received a hearing by the Senate Judiciary Committee. The measure proposes a voluntary public matching system for congressional elections. The bipartisan panel of elected officials at the hearing suggested numerous proposals to combat the corrosive impact of money in politics. Advocates praised disclosure, public financing and a Constitutional amendment to reverse the Citizens United ruling as key elements of future reform initiatives. Former Louisiana Governor, Buddy Roemer, stressed that under the current system politicians had to run on two fronts: a voting election for the general public and a money election to garner contributions from wealthy donors. 

 

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

New York Campaign Finance and Ethics News 

1. Last week, Governor Cuomo reestablished campaign finance reform as a priority for the next legislative session. A Newsday editorial calls on Governor Cuomo to stay the course. Meanwhile, reform advocates Sundeep Iyer and Michael J. Malbin write in a Journal News editorial that adopting a matching funds system statewide modeled on  New York City’s example can help lead to greater equality and diversity of political participation.   New York City’s public matching funds allow candidates to receive a 6-to-1 match for the first $ 175 a city resident contributes, turning a $ 100 contribution into $ 700 for the candidate. Iyer and Malbin’s research shows that the incentives public matching funds give to candidates to reach out to their own constituents—rather than focus exclusively on wealthy donors—are working. Nearly 90 percent of NYC census block groups were home to small donors who contributed to City Council candidates, while only 30 percent of NYC census block groups were home to small donors who gave to state Assembly candidates. In addition, small donors in NYC’s predominantly minority neighborhoods were far more likely to donate to City elections, where a public match was available, than to State elections. For instance, 24 times more small donors from Bedford-Stuyvesant, a poor and predominantly African-American neighborhood,  contributed to City Council races than to State Assembly ones.  

2. Congressional Representative Michael Grimm was recently cleared of accusations that he illegally accepted cash contributions from non-US citizens by the independent watchdog, the Office of Congressional Ethics. However the FBI is still investigating whether he embezzled millions of dollars worth of donations from New York Rabbi, Yoshiyahu Yosef Pinto, and his congregation.

  National Campaign Finance News

1. Massive campaign contributions flow unabated. The Washington Post reports that Goldman Sachs has contributed $ 1.4 million to Romney and another $ 2.2 million to his Super PAC, Restore Our Future. Bain Capital has donated $ 5 million to the candidate, his party and his Super PAC. Meanwhile, Restore Our Future has hauled in $ 10 million from its largest single contributor, casino magnate Sheldon Adelson. Adelson’s admission back in 2001 that he could derail a Republican bill, which opposed China’s Olympics bid due to human rights violations, is a prime example of the corrosive impact that money has on the political decisions of our leaders. Now cigar store owners have banded together to prevent the FDA from regulating “premium” cigars. Their Hybrid Super PAC – a traditional PAC that doles out money to candidates and a Super PAC that makes unlimited independent expenditures – has already raised $ 247, 159 this election cycle. 

2. So far in 2012 there is a disclosure gap, the difference between spending by 501(c) organizations ($ 127 million) and the amount that has been reported to the Federal Elections Commission ($ 12 million), of an astonishing $ 115 million. That is millions of dollars unaccounted for that have flowed into political ads and electioneering efforts by unidentifiable individuals with unknown motives. Unless these massive sums are disclosed and limitations established, it may usher in a Gilded Age on steroids, warns Russ Feingold in the Boston Review.

3. While the Chamber of Commerce and the National Federation of Independent Business fight campaign finance restrictions, small business owner, David Borris, asserts in an article in The Hill that transparency is an entrepreneurial value. Secret donations give big corporate interests an unfair advantage over their small business counterparts. “I don’t have a line item in my budget for ‘independent expenditure’ political ads” Borris recounts.  Whereas secret political spending and large campaign donations generate a system of pay-to-play politics, fair competition stresses that success should come from hard work, creativity and quality service. 

4. According to a survey conducted by the First Amendment Center, 63 percent of Americans believe that “corporations or unions should not be able to spend as much as they want supporting political candidates.” Unlike the Supreme Court, ordinary citizens reject the notion that the constitutional right to free speech translates into unlimited campaign expenditures. Furthermore, research by Drew Weston, professor of Psychology at Emory University, demonstrates that campaign finance reform messages strike a positive tone with nearly 61 percent of Americans from across the political spectrum.

5. The Democrats introduced the DISCLOSE Act in the Senate this past week. The DISCLOSE Act would require non-profit “social welfare” organizations that spend more than $ 10,000 on electioneering communications per year to publicly document all donors that contributed more than $ 10,000. Super PACs are currently allowed to wait for long periods of time before disclosing their donors, and 501 (c) organizations do not have to divulge this information at all. This common-sense transparency measure was unanimously blocked by Senate Republicans on Monday and Tuesday; yet, ironically, the same Republicans that filibustered the DISCLOSE Act, were big proponents of disclosure when they were behind in the fundraising game. A Huffington Post editorial debunks baseless attacks against the Act, including the assertion by long-time campaign finance reform champion, John McCain, that it was a partisan proposal that carved out exclusions for left-leaning organizations. Even former Republican Senators Warren Rudman and Chuck Hagel have urged their Republican colleagues to pass the DISLOSE Act, arguing that citizens deserve to know who is behind the anonymous attempt to control the outcome of elections. As the Albany Times-Union states, without disclosure “we're left with a twisted system that requires the disclosure of the names of ordinary citizens who write, say, a $200 check to the candidate of their choice, but shields the identity of someone who gives millions to a trade group or nonprofit that in turn saturates the airwaves with ads to attack or bolster a candidate.” 

6. This week, Mitt Romney accused the White House of practicing crony capitalism. Romney is contending that President Obama rewarded donors to his campaign with lucrative subsidies and contracts amounting to hundreds of millions of dollars. The influence of large donors in gaining ambassadorships, contracts and other favors has been endemic across recent presidencies – a real cause for concern and a product of our current pay-to-play campaign finance system. At the same time, Romney is not in the best position to criticize. While Obama has released the identities of all of his top fundraisers, or “bundlers,” Romney has refused to name his own. A quick look at the list of bundlers who are registered lobbyists, which Romney is legally mandated to disclose, reveals ties to banks and military contractors. As Adam Smith, Communications Director at Public Campaign Action Fund, eloquently writes “Mitt Romney is raking in big bucks from lobbyists whose main goal is to secure government contracts and get deals for their clients. He should be careful about throwing stones from his big glass house.” 

7. According to the New York Times, in an effort to fight fire with fire, Jonathan Soros has launched an anti-Super PAC Super PAC. The team at the new Super PAC, Friends of Democracy, seeks to run ads that will target House members and candidates who have strong records against campaign finance reform. Additionally, the Super PAC hopes to assist Congressmen that are supportive of transparency, lobbying reform, an independent Federal Elections Commission with greater authority, and better delineation between “independent” groups and organizations that directly support candidates.

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Syed Zaidi.

For more stories on an ongoing basis, follow the Twitter hashtag #moNeYpolitics and #fairelex.

New York Campaign Finance and Ethics News

1. Campaign finance reform and public financing have gained renewed momentum in New York even as the legislature is out of session. According to the Albany Times Union and North Country Public Radio, among other reports, Governor Cuomo has pledged to redouble his commitment to making reform his next big achievement. He will begin touring the state to educate voters about public campaign financing in an effort to increase its public salience. The Governor is optimistic that the legislature will consider the issue; the Times Union suggests that it could be taken up after the November election, possibly as part of an arrangement during a special session to increase legislators’ salaries.

2. The unprecedented flow of money into campaigns this election season is striking, but the problem is being compounded by the lack of transparency throughout the process. Non-profits, including 501(c)(4) organizations deemed as “social welfare” groups, are funneling millions into political ads, despite legal strictures prohibiting them from aggressively engaging in politics. In an effort to promote transparency and integrity, New York Attorney General Eric Schneiderman has vowed to investigate political spending by non-profits. A Newsday editorial praises Schneiderman for “issuing a subpoena for records from the National Chamber Foundation to determine whether it provided millions to the U.S. Chamber of Commerce, a business group, for political activities around 2004.”

National Campaign Finance News

1. Candidate Obama promised to overhaul the system of campaign finance when he ran for election back in 2008. However, despite requests from numerous watchdog and public interest organizations, the newly elected Obama administration failed to enact sweeping reforms. President Obama did not make a serious effort to put some teeth into the Federal Election Commission, or to appoint new members. Now the President may face the consequences of a gridlocked FEC.  Obama filed an FEC complaint on June 19 asserting that right-leaning “social welfare” organizations, namely American Crossroads and Crossroads GPS, were violating election law by sponsoring campaign ads in the guise of issue advocacy. However the passage of any resolution requires approval from a majority of the body’s six commissioners, and with an even partisan split and an unprecedented number of cases the prospects of a ruling remains dismal.

2. In a USA Today op-ed this week, Senate Minority Leader Mitch McConnell labeled the DISCLOSE Act “un-American,” and tried to frame the campaign for improved transparency as politically motivated and retaliatory.  In reality, the DISCLOSE Act simply fixes some of the gaps in our nation’s inadequate disclosure laws after Citizens United by requiring “social welfare” organizations, unions and businesses to report political spending above $ 10,000. And as the Brennan Center’s Jonathan Backer points out in a Huffington Post editorial, the application of the bill to a broad array of groups certainly does not denote political favoritism.

McConnell’s argument shifted from disingenuous to downright absurd when the Senator justified secretive donations through the NAACP v. Alabama Supreme Court decision, which ruled that forced disclosure of the NAACP’s member lists during the 1950s would inhibit civil rights activists’ freedom of association. Comparing a civil rights organization that faced serious threats of violence during the Jim Crow era, and non-profits and Super PACs whose sole function is to run political ads, is beyond egregious. As Americans are blasted with dubious political ads on the television and the internet, and utilize such information for voting decisions, they have every right to know who is paying the tab. Even in the highly controversial Citizens United ruling, the Supreme Court recognized the importance of publicly naming donors, “so citizens can see whether elected officials are 'in the pocket' of so-called moneyed interests."  As the USA Today pointed out in its rebuttal to McConnell, robust disclosure remains a critical tool for deterring the corrupting influence of secret donations.

3. As the presidential campaign kicks into full gear, recent revelations of excessive sums, amassed through campaign fundraisers, illustrate the immediate need for campaign finance reform. Of the 1,200 individuals that the USA Today has identified as Romney bundlers, nearly 25 percent hail from the multi-millionaire world of investment and finance. Similarly 14 percent of Obama’s fundraisers work in the finance industry. Bundlers who are able to aggregate contributions from families, friends and business associates have become crucial in this election to both parties, with just 532 people directing nearly $ 106.4 million to Obama’s reelection efforts through April 20. Unlike Obama, Romney has refused to name his top fundraisers.  The immense political donations from select groups, industries and individuals begs the question whether such contributions will affect the policy positions of the candidates running for the highest office in our nation.

Money in Politics This Week

Every Friday, the Brennan Center will be compiling the latest news concerning the corrosive nature of money in New York State politics—and the ongoing need for public financing and robust campaign finance reform. We’ll also be linking to dispatches from around the country highlighting the national scope of this crisis. This week’s links were contributed by Robert Friedman.

For more stories on an ongoing basis, follow the Twitter hashtags #moNeYpolitics and #fairelex.

New York Campaign Finance and Ethics News

1. The end of the legislative session may be two weeks past, but support for campaign finance reform shows no signs of fading.  An Albany Times Union editorial argues that the failure to pass reform legislative session casts a cloud over the entire legislative session and that it must be a top priority when the legislature reconvenes.  “[V]ictory laps and self-congratulatory speeches don’t get the unfinished business done — the business, that is, of reducing the dangerous influence of big money in politics and limiting the power of well-funded special interests.”  

2. New York City’s public financing system facilitates fairer and more democratic elections.  Nonetheless, anti-reform groups have brought a constitutional challenge to the City’s election law, alleging that it violates the First Amendment.  The Brennan Center for Justice, Citizens Union, Common Cause New York, the League of Women Voters of New York City, and New York Public Interest Research Group submitted a friend-of-the-court brief this week, urging the federal district court hearing the case to uphold the law.  The laws’ defenders argue that the campaign finance scheme poses no constitutional problems and furthers the values of the First Amendment by encouraging democratic participation.  “The City’s public finance system stands tall as a bulwark against a nation awash in political spending dominated by corporations, unions and other moneyed interests,” said Dick Dadey, Executive Director of Citizens Union.

National Campaign Finance and Ethics News

1. As the November elections grow closer, the danger of dark money rises, but there are signs of progress in the effort to combat the harmful effects of unchecked money in politics.  Last week, New York Attorney General Eric Schneiderman began an investigation into how the Chamber of Commerce, an advocacy group that does not disclose its donors, is obtaining funds.  This week, the I.R.S. began questioning 501(c)(4) groups to determine if they really are “social welfare” groups, which would allow them to keep donors anonymous, or if they are actually primarily engaging in political activity, which would force either disclosure of donors or renunciation of tax exempt status.  An editorial in The New York Times asserts that vigorous and continued enforcement is necessary to make the fall elections as fair as possible.

2. An FCC rule mandating broadcast television stations to report the buyers of political ads will soon take effect.  Originally passed in April, the rule requires certain stations in the 50 largest TV markets to begin submitting information on political ad buys to the FCC by August 2.  The FCC, in turn, will post the information online, making it available to anyone.  The new database will help shine light on who is funding the ubiquitous political ads thrust upon every household.

3. Though the Supreme Court refused to revisit Citizens United last week, a federal appeals court took a significant step to ensure that the decision is not extended any farther.  In United States v. Danielczyk, the Fourth Circuit Court of Appeals held that bans on direct corporate campaign contributions remain constitutional.  The decision overturned a lower court’s judgment that Citizens United rendered any such ban illegal, noting that direct contributions stand on different footing from independent expenditures, which Citizens United ruled could not be capped.